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HMRC internal manual

Employee Tax Advantaged Share Scheme User Manual

Schedule 2 share incentive plan (SIP): Types of award: Dividend shares: Company’s choices

Where a Schedule 2 SIP provides for dividend reinvestment the company can decide to specify an amount, any such amount determined by the company, which may be up to 100% or any lower amount of the cash dividends received on plan shares held on behalf of participants, which will then be reinvested in more shares on the employees’ behalf, (paragraph 62(1)).

The company may modify or revoke the dividend reinvestment arrangement at any time by notifying employees that the terms of their free share and/or partnership share agreement, as appropriate, are modified (paragraph 62(4)).

If an amount of the dividend is reinvested in shares under a plan, the trustees must not issue a voucher for it. There is no tax credit in respect of that amount (Section 493).